Allianz Income Growth excels, with the most attraction seen in Technology and US themes.
With new year 2024 comes, let's delve into the latest data to summarize a comprehensive overview of 2023 offshore funds in Taiwan. As of November 2023, the total asset scale of registered offshore funds in Taiwan stands at USD 120.59 billion, approaching the historical high observed in 2021 despite the sluggish fund flows witnessed in 2022. While the overall scale of offshore funds remains relatively stable, shifting happened across categories within overall offshore fund pockets. There is a lack of noticeable inflows from other investment categories. The market appears to be predominantly influenced by other product types, such as ETFs and direct bonds, for instance.
Examining asset distribution, equities maintain a stable position, while fixed income faces a decline in market share, dropping from over half of the total fund volume to below 40%. Data indicates that equities are on the verge of surpassing fixed income since 2021. In the current trend of crowding towards specific sectors and regions, notably technology information and United States themes, we observe a substantial growth in the fund size of notable funds, such as the AllianceBernstein American Income Portfolio, BlackRock World Technology Fund and JPMorgan US Technology Fund. Out of 979 registered funds in Taiwan, the top 10 funds dominate almost 40% of the market. Notably, rise of assets on multi-asset funds is basically driven by success of Allianz Income and Growth Fund. The fund collects more than USD 20bn from Taiwanese wallets, occupying more than 17% of total offshore fund land. Looked back to the past five-year horizon, Allianz Income and Growth is the only fund stayed always in top 10 list with continuous growth, even in the turbulent 2022. Compared to its global asset growth, Taiwanese overall tend to favor the investment style and fund features. By Allianz Income Growth’s strong growth pattern, it is highly probable that multi-asset funds will surpass one-fourth of the total fund volume for the first time, reshaping the composition of offshore funds in Taiwan.
Exhibit 1: Evolving dynamics of offshore fund asset classes
High-yield and emerging market bonds historically stand more than 60% of total fixed income funds, while the two major categories are experiencing a general contraction. High-yield bonds for a long time have enjoyed significant favor among Taiwanese investors. In 2021, they constituted nearly half of the total fixed income funds. However, their dominance has been challenged since 2022 due to the impact of interest rate hikes, leading to a notable squeeze by investment-grade bond funds. This shift has resulted in the lowest market share for high-yield bonds in the past five years. Emerging market bonds also have faced challenges, contributing to a continuous obvious reduction in total fund sizes within this category. Some popular names of Emerging Market bond fund are suffered significant outflows in the past years. Even with moderate performance of emerging markets year to date, we witnessed overall outflows from emerging markets funds.
This dynamic landscape reflects the influence of interest rate fluctuations and market headwinds on the preferences of Taiwanese investors, shaping the composition and performance of fixed income funds in recent years. As markets anticipate end of interest rate hikes and the potential for rate cuts in 2024, there is optimism that high-yield and emerging market bonds may experience a resurgence.
Exhibit 2: High yield and emerging market funds matter the fixed income category.
Navigate continuously oversees fund markets movement. In the brand-new start of the year, we extend our warm wishes for a prosperous outlook in 2024.